Author: Zenia Aziz Khoirunisa
INTRODUCTION
Last March, to be exact on March 23, 2021, the international community was shocked by a serious incident on the Suez Canal, one of the busiest shipping lanes in the world. That is Ever Given ship, with a shipping route from Malaysia to the Netherlands, stuck diagonally across the Suez Canal. The ship’s large size has covered the entire width of the canal, holding up vessel traffic for days. This is causing knock-on effects on the movement of cargoes globally, as 12 percent of global trade is carried onboard ships using the canal. This incident resulted in delays in shipping lanes, 400 ships queuing, and losses reaching $400 million per hour, based on the approximate value of goods that move through every day, according to Lloyd’s List. However, before discussing further the legal consequences arising from this incident, we need to know more about the Ever Given ship and the vitality of the Suez Canal as a shipping lane in the world.
Ever Given is one of the largest container ships in the world which was built at the Imabari Shipbuilding shipyard, Japan, in December 2015 for almost 3 years. The ship, which is operated by Evergreen Marine -a container shipping and transportation company from Taiwan- has an overall length of 399.9 meters with a full width of 58.8 meters. Ever Given also has a height of 32.9 meters and a tonnage of 220,940 gross tonnages. This ship weighs 199,629 tons with a container capacity of 20,124 TEUs (Twenty-foot Equivalent Units). The ship is owned by Shoei Kisen Kaisha (a subsidiary of Imabari Shipbuilding) and registered in Panama. In line with the discovery that while stuck in the Suez Canal, the ship was under the Panamanian flag.
The Suez Canal is an artificial sea transportation route in Egypt that connects the Mediterranean Sea with the Red Sea, built by Ferdinand de Lesseps in 1879. The construction of the Suez Canal made it provide the shortest maritime route between Europe and other landmasses located around the western Pacific Ocean and the Pacific Ocean, also the shortest maritime route from Europe to Asia. The existence of this canal shortens the travel time and costs of ships heading to Asia since they do not have to pass through the Cape of Good Hope at the southern tip of Africa which is the normal shipping route. According to data on the Suez Canal Authority website, 18.880 ships transited the Suez Canal in 2019, an increase of 706 ships from the number of ships transiting in the previous year.
THE CAUSE AND INVESTIGATION
Ever Given spent 6 days of stocking in the Suez Canal before finally being refloated on March 29, 2021. The Suez Canal Authority estimates the cost spent to free the Ever Given cargo ship at US$1 billion. Not only the cost of its refloating effort that was fantastic, but the snagging of the Ever Given cargo ship in the Suez Canal also cost the Egyptian government US$14 million or around Rp. 203 billion per day.
After being successfully refloated, the ship was towed to Great Bitter Lake to be detained for the investigation process and due diligence. The head of the administration of the Suez Canal Osama Rabia said the investigation into the incident had proved that full responsibility rests with the captain of the ship who made a mistake during the ship’s navigation. As such, the lawsuit is based on Egypt’s 1990 Maritime Navigation Law, under which the ship’s captain is liable for any damage to the Suez Canal. Rabia also denied claims that the Suez Canal Authority was responsible for the incident. Because even though the ship ran aground in bad weather conditions, but on the same day more than 30 ships made it through the canal before the incident with Ever Given.
THE GENERAL AVERAGE PRINCIPLE
The owner of the Ever Given, Shoei Kisen Kaisha of Japan, notified Evergreen on April 1 that it declared a general average following the work to refloat the ship in the Suez Canal. The job of determining how much the shippers will have to pay is up to an adjuster. The adjuster in the case of the Ever Given is Richard Hogg Lindley, according to documents obtained by The Loadstar. The process requires getting in touch with all of the shippers that had cargo on board. General Average is a principle of maritime law that essentially establishes that all sea cargo stakeholders (owner, shipper, etc.) evenly share any damage or losses that may occur as a result of the voluntary sacrifice of part of the vessel or cargo to save the whole in an emergency. The basis behind this principle is that a party who has suffered an extreme financial loss to save property belonging to others has the right to be compensated for such loss. The origins of General Average date back to the York-Antwerp Rules of 1890 but have been modified numerous times since to adapt to modern supply chain conditions, most recently in 2004. However, the grounding of the Ever Given is shaping up as potentially the most complex ‘general average’ (GA) claim of all time, with litigation potentially involving 20,000 Teu and up to 20 cargo interests per container, Lloyd’s List has reported.
THE NEGOTIATION AS PRELIMINARY DISPUTE RESOLUTION
Before the court’s judgment was handed down, the owner of Ever Given and the insurance company had been trying to negotiate for approximately 15 days to reach an agreement concerning the amount of compensation related to the dispute involving the Suez Canal Authority. Based on the Associated Press on Wednesday (23/6/2021), Stann Marine, a team of lawyers representing the owners and insurance companies of Ever Given, as well as the Suez Canal Authority, confirmed this. The dispute focuses on the number of compensation claimed by the Suez Canal Authority for the refloating of Ever Given.
On the Egyptian talk show “Al-Hayat Al-Youm” on Wednesday (23/6/2021), the head of the Suez Canal Authority, Lieutenant General Osama Rabie, said the parties involved had agreed on the amount of compensation. The compensation is to cover the cost of the rescue operation, the cost of traffic jams on the canal, and the transit costs of ships lost due to Ever Given clogging the canal for a week. Initially, the Suez Canal Authority asked for compensation of USD 916 million. This amount then decreased to USD 550 million. Since being refloated, as shipowners and canal authorities negotiating the compensation, Ever Given has been ordered to remain on the lake in the middle of the canal, with most of its crew.
THE COURT JUDGMENT
The Egyptian Court fined the owner of Ever Given US$916 million in accordance with the initial claim of the Suez Canal Authority. The fine is compensation for the losses caused by the Panamanian-flagged cargo ship running aground in the Suez Canal. An Egyptian court also confiscated the vessel until a fine was paid by its Japanese owner, Shoei Kisen Kaisha. The judgment was handed down on Tuesday (13/04/2021) at local time. Local media, Al Ahram reported, the bill included the cost of maintenance and the cost of international rescue operations.
Although the court’s judgment is based on the law in force in Egypt, in fact, the implementation of the decision by the shipowner is not in accordance with the provisions of international law contained in The Hague-Visby Rules. Article IV Rule 2 stated that:
“Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from:
- Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship”
However, the implementation of the Egyptian court’s judgment by the owner of the Ever Given ship is a form of respect for the sovereignty of the country where the Suez Canal is located. This is in accordance with Article 2 United Nations Convention on The Law of the Sea (UNCLOS) 1982 that stated:
“The sovereignty of a coastal State extends, beyond its land territory and internal waters and in case of an archipelagic State, its archipelagic waters, to an adjacent belt of sea, described as the territorial sea”
THE ESSENTIAL OF PREVENTION
Based on the International Chamber of Shipping, 11.1 billion tons of goods were moved across the world’s oceans and according to the World Shipping Council, the liner industry moves more than 4$ trillion in goods annually. Moreover, the world situation that is currently facing the Covid-19 Pandemic where restrictions on people’s mobility are being intensified, has made the shipping sector becomes very fundamental to meet the daily needs of life. The existence of bottlenecks in this sector, briefly, greatly affects the balance of global supply chains. Therefore, it is very important that in carrying out shipping, it is absolutely mandatory to pay attention to due diligence to prevent a similar incident.
The UK courts have emphasized the importance of doing this due diligence in the case of the crude oil tanker “Cape Bonny” was sailing between Argentina and China in 2011 when No.1 main bearing failed catastrophically. The court said that:
“A prudent engineer or superintendent would have decided, in the light of the May 2011 deflection readings, that bearing clearance measurements should be taken. The failure to do so was a failure to exercise due diligence to make the vessel seaworthy.”
This decision reminds shipowners and operators of the importance of due diligence to make a vessel seaworthy and the importance of providing evidence of exercising this due diligence. It also shows shipboard engineers and shore-based superintendents that their actions and lack of actions can important economic consequences.
In the case of Ever Given, the captain of the ship needs to ensure that due diligence is carried out to minimize wrong actions taken in handling the vessels since the investigation result has stated that the cause, in that case, is the human error factor in navigating the vessel. The efforts to avoid similar incidents have also come from authorized officials. Officials have been keen to avoid reputational damage from the incident, declaring Egyptian efforts in the salvage operation. President Abdel Fattah al-Sisi swiftly pledged investment to avoid any repetition of the crisis, and in May approved a two-year project to widen and deepen the southern part of the waterway where the ship ran aground.
CONCLUSION
The Ever given case has made the international community aware of the importance of the principle of vigilance and prudence in the international shipping sector considering the enormous economic consequences that arise as a result of this case. Moreover, restrictions on the mobility of the world’s population due to the Covid-19 pandemic, which does not show time to end at this time, add a real dependence on the shipping sector. Therefore, awareness is needed by many parties to avoid the same incident. Starting from the carrier itself who is obliged to ensure that cargo ships have a seaworthy predicate through due diligence to the competent authorities who are obliged to provide effective mitigation infrastructure.
For a better experience you can download this Oracle here for free